Just four months before the end of manufacturing in Australia, and six months before it officially moves its entire marketing operation from Sydney to Melbourne, Toyota appears to be facing major challenges pulling off the move and could lose staff with a combined 4,000 years of experience.

“The Japanese simply could not believe no one would move to Melbourne”

Australia’s highest-selling car brand confirmed at the start of the year it would cease production in Australia in October, but also dropped a second bombshell when it announced it would be relocating its entire administrative arm, including its marketing division, to Melbourne.

The move has resulted in a large number of marketing staff opting to take redundancies and remain in Sydney with just 20% of the 370 strong Sydney office agreeing to the Melbourne move, Mumbrella understands.

As a result Toyota has been forced into a large-scale recruitment drive to fill the 300 positions across marketing and sales including mid and senior-level positions.

Observers close to the company say that the refusal of many senior staff members with decades of experience to move their families to Melbourne had been predicted but not believed by Japanese managers.

“As I understand it, it is going exactly as it was predicted when the move was announced two years ago,” one former executive close to the company tells Mumbrella.

“The Japanese simply could not believe no one would move to Melbourne.

“They will pay for it in spades.”

“Sydney was an import culture and Melbourne was a manufacturing culture. The problem is the reason they were number one was Sydney’s import culture was quick and flexible.

“The other problem is that Sydney is their biggest market and it was good for the marketing team to be there. You have to have your finger in the water.”

Former Toyota Australia CEO John Conomos believes moving marketing to Melbourne is a mistake

John Conomos, the former CEO of Toyota Australia who over a 30-year career lifted Toyota from a just another car brand in a market dominated by Holden and Ford to number one, told Mumbrella shifting the marketing culture to Melbourne will be difficult to pull off.

“I would have totally opposed the move to the south,” Conomos says.

“It was always going to be a huge wrench. The DNA of the sales and marketing operations are in Sydney and you cannot transfer that DNA. He [current Toyota Australia CEO Matt Callachor] won’t be able to replace Sydney and the psyche.

“They [Japanese head office] completely misread it.”

Conomos says it would take at least two years for the newly set up departments in Melbourne to get up to speed. The one thing working in the business’ favour however is it will no longer be burdened with the complexities of being a manufacturer and can now operate purely as a distributor and focus its efforts, he says.

Overseeing the entire move will be Matthew Callachor, another company veteran who was originally trained under the guidance of Conomos, considered the father of Toyota’s operations in Australia.

The loss of talent at the company has been at the highest level, with the marketing department and communications team suffering.

Another executive close to Toyota, however, told Mumbrella that if you were to look at the executive level, the figure would be even less.

“I saw some figures that the average tenure at Toyota was 10.5 years. These are people who have grown up in the Sutherland Shire, their partners have business there, their families are there and kids are going to school. A lot just don’t want to up sticks and move everything to Victoria. If you figure that 400 people may not be going, that is up to 4,000 years of experience.”

Krajcer says all employees were given access to Toyota’s DRIVE program.

“Here, they meet with a one-on-one consultant and organise training opportunities that best suit their needs,” Krajcer says.

“The range of jobs that car workers have been retraining for is vast, from truck drivers, warehousing and logistics, to the less obvious nursing and operating theatre technicians.

“Toyota Australia’s priority over the remaining months is to continue to support our employees in every way possible so that they are well prepared for the future.”

While Toyota continues to grow overall sales, sales in the passenger vehicle category have declined for three straight years and the company’s growth has been sustained by investment in fleet sales.

“Fleet deals are done with money not marketing, and it is an expensive way to maintain market share,” a source says.

In 2016 across all marques commercial fleet sales jumped 13% while sales of passenger vehicles dropped 5.8% compared to 2015 according to VFACTS new vehicle sales figures.

One unique element about Toyota’s Australian operations is it is believed to be the only market in the world where Toyota owns the operations and holds the number one position.

“There are so many unknowns, they don’t know what they are going to lose,” another executive close to the business says.

Toyota’s marketing team has pushed innovative ideas such as a life-sized Tonka truck

In addition, it is believed head office in Toyota City in Japan perceive the Sydney and Melbourne offices differently.

“The Japanese always used to say Melbourne people were the farmers, they were rooted to the land [the manufacturing plant],” a source says.

“Sydney people are cowboys, they can rove around. In their minds the cowboys were the roving conquerers of the market.”

Another impact will be on suppliers such as agencies which are being forced to mirror Toyota’s move within their own teams.

In October Gemba moved to strengthen its relationship with Toyota, buying the sponsorship management division of Bullet Marketing, which runs Toyota’s sponsorship of events such as the Tamworth Country Music Festival.

As part of the move Gemba is moving the decision to Melbourne to work more easily with relocated Toyota marketing team.

Saatchis and BWM are also understood to be beefing up account services teams in their Melbourne offices to work with Toyota.

While former CEO Conomos believes Toyota is making a major mistake abandoning Sydney, he backs his former protege in pulling off the move.

“It will be a couple of years and nothing will change for the public,” Conomos says.

“But it’s the treatment of the dealers that is important. They must be respected.”

Another executive agrees, saying the business will ultimately weather the impact of the transition from Melbourne to Sydney even if there is short-term impact.

“Its a major change but the company is bigger than all the people who are leaving.”

How long will it take to rebuild the marketing team of Australia’s number one car brand? No one really knows, but with 80% of the team gone, the challenge facing Toyota over the next six months is massive and the impact of the move could be felt for years to come.

Simon Canning was Mumbrella's marketing and advertising editor from 2015-2017. In a career spanning journalism and communications over more than 30 years Simon has become one of Australia’s most respected analysts and commentators on the advertising, marketing and media industries. A regular commentator on radio and TV, Simon has also worked in media in the US and UK .

Toyota moved from its manufacturing base in Melbourne to Sydney years ago, losing talent in the process, I think the move was because key executives wanted to live in Sydney, good reason to separate your marketing from your manufacturing base, I don’t think. Companies move bases all the time, depending on the kickbacks from governments, will it impact on Toyota, I don’t think so.

Totally wrong. Toyota S&M have always been in Sydney with its roots in the Thiess Toyota commercial vehicle sales & marketing operation. Manufacturing has always been in Melbourne with its origin being AMI which became AMI Toyota. When Thiess and AMI were merged in 1988, S&M was allocated to the Sydney S&M team (under Conomos number one in commercial vehicles for years and a market share in the high 30s – 40% share in May 1986) and Melbourne retained manufacturing of cars (market shares around 11-14%). AMI were good car builders but not a S&M culture. True farmers. The cowboys in Sydney had a great S&M culture but knew nothing about building cars!

If Toyota really wanted new thinking they would have moved somewhere new and started fresh with a hand picked crew of sales and marketing people. They might also have used the opportunity to deal with the old school thinking that was rife in Melbourne. However the manufacturing crew always thought Sydney was out of control. This was despite the fact Toyota marketing managed to dominate sales (largely thanks to the Connomos brigade) Melbourne always knew better. So they decimate sales and marketing with a poorly considered move to Melbourne. The best people left a long time ago. It’ll be a corporate case study.

Toyota is not only dependent on passenger vehicles, it also totally dominates SUVs and pick ups. It sells more than double the number of cars as the second biggest marque.

There is no difference between Melbourne and Sydney – standing in a suburban street and you would have no idea which one you were in – just a bunch of prima donnas in Sydney who mistakenly think they’re the only ones holding the place up.

The Victorian mantra is to go in with a “no, not possible”, then be dragged kicking and screaming up from there. The NSW mantra is to jump right in and see how it can be done.

Staff are replaceable, knowledge isn’t and in quitting manufacturing this decision has thrown the baby out with the bath water by upending the entire business.

Shame, of the three brands quiting Aus manufacturing Toyota was the best placed to just keep calm and carry on, but they stuffed it by over complicating the entire process and in turn burning the one good thing they had going for them in the transition – their staff!

Lets not forget that this decision also drags Lexus along for the ride – if ever there was a moment in time for Lexus to truely build its own place and identity in Aus it was now but it will just continue on as a division of Toyota’s Australian opportations.

Another challenge is that a significant proportion of the staff that agreed to move are taking on promotions that they may or may not be ready for. Having worked agency side with them for over 5 years, the loss of corporate knowledge both client and agency side is massive. In the long term they’ll come out better for the injection of new blood but the short term will be mayhem.

The key issue is why is Toyota moving their S&M arm from Sydney to Melbourne at the same time as they are withdrawing their manufacturing. Data tells us that whenever a brand withdraws local manufacturing they lose market share. Doesn’t seem prudent to then lose significant years of combined corporate knowledge/relationships at the same time. The decision is likely to punish the brand harshly.